Creation and requirements of express trusts - Certainty of intention to create a trust

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Overview

Certainty of intention is key to establishing valid express trusts, forming a vital part of trust law and an important topic for the SQE1 FLK2 exam. This principle ensures trusts are set up with deliberate and clear purpose, setting them apart from other legal arrangements. Understanding intention in trust creation is crucial for legal professionals, as it lays the groundwork for interpreting and enforcing trust instruments. This guide explores the concept, legal views, and practical uses, providing students with the insights necessary for exam success and future legal careers.

The Concept of Certainty of Intention

Certainty of intention, along with certainty of subject matter and objects, confirms the settlor's definitive commitment to create a trust. This prevents trusts from being formed by accident or through misreading a settlor's wishes.

Key Elements of Certainty of Intention

  1. Clear Expression of Obligation: The settlor must clearly intend to impose duties on the trustee.
  2. Beyond Mere Wishes: Intention must surpass simple hopes, creating a binding obligation.
  3. Objective Interpretation: Courts assess intention based on the words used, not personal intent.

Legal Test for Certainty of Intention

Courts use an objective approach to determine if a settlor intended a trust. This involves:

  1. Analyzing the language in the trust document or communications
  2. Reviewing the context and circumstances of the trust creation
  3. Determining if a reasonable person would see a trust intention

Judicial Interpretation and Case Law

Interpretations of certainty of intention have been refined through case law, shaping how courts handle this requirement.

Notable Cases

  1. Knight v Knight (1840)

    • Outlined the three certainties for express trusts

  2. Paul v Constance [1977]

    • Showed that intention can be inferred from actions

  3. Re Kayford Ltd [1975]

    • Indicated that business context can reveal intention

  4. Re Adams & the Kensington Vestry (1884)

    • Highlighted the need for directive language to establish a trust

Analysis of Judicial Reasoning

Courts stress the need for clear language but also acknowledge intention can be inferred from actions and circumstances. This flexible view allows for recognizing trusts in diverse situations.

Precatory Words and Their Impact

Precatory words, expressing wishes rather than obligations, often complicate certainty of intention.

Examples of Precatory Words

  • "It is my wish..."
  • "In full confidence..."
  • "Hoping that..."

Legal Impact

Precatory words typically indicate no intention to create a trust. Courts may, however, consider the broader context and purpose.

Modern Approach

Contemporary courts assess:

  1. The full document and circumstances
  2. The parties' relationship
  3. The settlor's legal understanding

This allows flexible interpretation while requiring a clear intention.

Distinguishing Trusts from Other Legal Arrangements

Certainty of intention differentiates trusts from other concepts like gifts or contracts.

Trusts vs. Gifts

  • Trusts: Ongoing obligation to manage property for beneficiaries
  • Gifts: Direct transfer of property without obligations

Example

"I give my vintage car collection to John to look after for my children" likely creates a trust, whereas "I give my vintage car collection to John" suggests a gift.

Trusts vs. Contractual Obligations

  • Trusts: Create equitable rights
  • Contracts: Establish legal rights and duties

Example

"I entrust £10,000 to my solicitor to invest for my grandchildren" implies a trust, while "I agree to pay my solicitor £10,000 to manage my investments" indicates a contract.

Advanced Concepts and Applications

Discretionary Trusts

In discretionary trusts, a clear intention is needed for a trustee's discretion in distributing trust property, bounded by the trust instrument.

Powers of Appointment

The settlor must specify their intention to give someone authority to select beneficiaries, differing from trust obligations.

Non-Charitable Purpose Trusts

Non-charitable purpose trusts require precise language about the purpose, as identifiable beneficiaries can be a challenge.

Practical Applications and Exam Considerations

Understanding certainty of intention is vital for drafting trust documents and advising clients.

Drafting Considerations

  1. Use clear language for trust intentions
  2. Avoid precatory words unless intended as wishes
  3. Clearly differentiate between trusts and other arrangements

Exam-Relevant Scenarios

  1. Ambiguous Language: Given: "I leave my house to my sister, hoping she'll use it for our parents." Analysis: Determine if this is a trust or a gift with a moral clause.

  2. Commercial Trusts: Given: A company separates customer funds into a different account. Analysis: Decide if this action shows a trust intention.

  3. Inferring Intention: Given: Someone regularly refers to property as "ours" with no formal paper. Analysis: Assess if these actions establish a trust.

Conclusion

Certainty of intention is essential for creating express trusts, requiring thoughtful consideration in legal practice and exams. Its interpretation involves legal precedents and the clear distinction between obligations and wishes. For exam candidates, understanding this concept is crucial for analyzing trust-related questions and offering reliable legal advice.

Key points:

  1. Certainty of intention is one of three certainties for valid trusts.
  2. Courts use an objective test to establish trust intention.
  3. Clear language is preferred, but intention can also be drawn from actions and context.
  4. Precatory words seldom create trusts, context is key.
  5. Distinguishing trusts from gifts and contracts is crucial.
  6. Advanced concepts require focused intention.
  7. Practical application involves careful drafting and analysis to establish trust creation.

Mastering these principles equips you to address complex trust issues with confidence in exams and legal practice.